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The Development of Supply Chain Relationships:
A Multi-Lens Approach Professor Peter Hines and Donna Samuel, Lean Enterprise Research Centre (LERC), Cardiff Business School, Cardiff University, Aberconway Building, Colum Drive, Cardiff, CF10 3EU (Hines [email protected]) Corresponding author: Peter Hines (Tel: 029 20876005 or email [email protected]) Manuscript: 397 Revision: #1 First Submission: December 2004 Acknowledgements: The authors would like to express their gratitude to all the individuals and firms involved, in particular Bernie Kelly of the Canner and Andrew Stewart of Intelog. Thanks also go to the David Gregory and the Australian National Food Industry Strategy whose funding made this work possible
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The Development of Supply Chain Relationships:
A Multi-Lens Approach
Abstract
The last few decades have witnessed the rise of research into Supply Chain
Management and relationships within it. However, in many cases previous research
has taken a single-lens approach to understanding and explaining what is happening
as well as in subsequently developing solutions. The research reported here seeks to
take a multi-lens approach to relationships in the supply chain using a complete farm
to retail food supply chain as an instrumental case. The field research was carried out
using a Clinical Methodology in order to yield a deep understand of relationships in
this supply chain and the variables that have led to this situation. A set of theoretical
and managerial aspects are explored to show how others may learn from this research.
Key words: Relationships; Integration; Supply Chain; collaboration
1. Introduction
Several authors have recently argued that although Supply Chain Management (SCM)
has received a good deal of attention in the literature since the early 1980s, the
concept is still not particularly well understood (Croom et al., 2000; Dubois et al.,
2004; Cigolini et. al., 2004). A case in point is integration through buyer-supplier or
supply chain relationships (for instance: van Donk and van der Vaart, 2004).
Specifically, the majority of current approaches tend to address the subject from a
single perspective or lens.
A number of different perspectives have been taken in the literature, including power
(for example, Cox 2001a; Christiansen and Maltz, 2002), trust (for example, Sako,
1992; Simons et al, 2004) and risk (for example, Rousseau et al (1998); Zsidisin
(2003)). However, it would appear to the current authors that although each of these
variables has merit, they are, on an individual basis, rarely the only variable that is at
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play. Holding similar views, a few authors have attempted to link two of these three
variables together, for example power and trust (Ramsay, 1996) or risk and trust (Das
and Teng, 2001).
Building on this perspective, we propose a more pluralist multi-lens research view
where a single instrumental case is viewed from a range of explanatory perspectives
(Stake, 1998). In addition, it is our belief that, in some cases, there may be other
variables at play that have not yet been sufficiently explored in the Supply Chain
literature. The paper will seek to explore this area through the following set of
research questions.
Our first research question is therefore to understand how these different variables
impinge and explain the actions of actors within a supply chain case. Linked to this
first question, our second question is to explore which of these might be more
important in shaping the actions of each actor. Our third question seeks to understand
whether there are any other important variables in addition to power, trust and risk. If
indeed there is a more complex set of explanatory variables at play, our fourth
research question will address how such a level of understanding might be used to
help the actors to improve their supply chain through better relationships and effective
improvement activities.
The vehicle for exploring these questions is a single longitudinal case involving a
food processing firm and seven single or groups of firms within the Australian food
industry supply chain. Each of these seven firms acts as a different entity within the
supply chain but all have a dyadic relationship with the food processor who has
instigated a supply chain improvement activity and invited the other firms to take part.
As such, although the research frame is a full supply chain, the focus of relationship
development will largely be that between the food processor and the other firms
involved.
2. A Review of the Existing Literature
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The idea of forming cooperative rather than adversarial relationship with suppliers
made an appearance in the literature several decades ago (Farmer and Macmillan,
1978). Since then the idea has been re-emerged under a variety of names including:
co-makership (Merli, 1991); reverse marketing (Leenders and Blenkhorn, 1988);
supplier alliances (Burdett, 1992) and partnership sourcing (DTI/CBI/PS, 1998).
Variations have also appeared within the marketing domain under the title of
relational or relationship marketing (Evans and Laskin, 1994) as well as the strategic
management field as strategic alliances. At the same time, the idea of cooperative
relationships has been extended from immediate suppliers to encompass the wider
supply chain (MacBeth et al., 1989) and coupled with ideas borrowed from Japanese
automotive and lean production literature (Womack and Jones, 1990, 1996; Hines,
1994, Laming, 1993).
Ramsay (1996) argues that the majority of the academic literature emerged from an
outright attack on the traditional, adversarial approach to supplier relationships with
the assumption that collaboration and partnerships are the sine qua non of successful
supplier relationship management. This latter view of relationship management has
been supported by influential intermediary bodies in the UK such as the
Confederation of British Industry (CBI) and the Department of Trade and Industry
who provided the initial support funding for Partnership Sourcing Ltd. (PSL).
However, evidence from many practitioners is that the term partnership has been
somewhat overused, often inappropriately where little real change has occurred
(McIvor et al, 1998).
The traditional purchasing-based view of SCM was to leverage the supply chain to
achieve the lowest initial purchase prices whilst assuring supply and was
characterised by: multiple suppliers; supplier selection based primarily on purchase
price; arms-length negotiations; formal short-term contracts and centralised
purchasing. A more contemporary view of SCM, heralded by some as the ‘new
paradigm’ (Speckman et al., 1998), redefines SCM as a process for designing,
developing, optimising and managing the internal and external components of the
supply system, including material supply, transforming materials and distributing
finished products or services to customers that is consistent with overall objectives
and strategies. The essence of SCM is as a strategic weapon to develop a sustainable
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competitive advantage by reducing investment without sacrificing customer
satisfaction (Lee and Billington, 1992). While managers have long acknowledged the
importance of getting closer to their key customers, the logic has now been extended
to the upstream supply chain so that close ties with key suppliers are also seen as
important (Helper, 1991). Speckman et al. (1998) conceptualise the transition from
traditional open-market negotiations to collaboration as a continuum (Figure 1),
noting that the cooperation and coordination stages are necessary but not sufficient to
reap the benefits of effective collaboration.
(see figure 1)
Collaboration, then, is seen by many as an integral facet of a wider SCM strategy
(Anderson and Narus, 1990; Bhote, 1987; Ellram, 1990; Kapoor, 1988; Speckman
and Sawhney, 1995). This popular view is not without its critics and it is from a
balanced approach to the work of collaboration (both advocates and critics) that a
picture begins to form of what constitutes the determinants of successful SCM.
Most advocates regard collaboration as an integral part of SCM noting that, in
Speckman et al.’s (1998) terms, the road from open-market to collaboration is a long
one and should not by travelled by each and every buyer-seller relationship. Many
authors have advocated a portfolio approach to supplier relationships management
(Kraljic, 1983; Cox, 1996; Olsen and Ellram, 1997; Bensaou, 1999). Whilst today the
arm’s length approach is now subject to criticism because of its focus on short-term
cost reduction, it is often proposed under certain conditions: in commodity markets,
with multiple suppliers, low asset specificity and little market uncertainty where the
market serves as a control mechanism to ensure competitive prices (Schary and
Skjott-Larsen, 2001).
However, much industrial purchasing would not meet these market characteristics and
here collaboration is usually presented as the obvious alternative. SCM demands a
business transformation in which managers attempt to mitigate uncertainty and exploit
opportunity through the creative use of both suppliers and customers by evaluating
who best supplies value and then leveraging that expertise/capability through the
entire supply chain. Speckman et al. (1998) note that cognitively, such an effort
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requires sharing what once might have been considered proprietary information,
relinquishing control to others in the supply chain and trusting that your supply chain
partners will act in your best interest. Trust clearly emerges throughout the literature
as a key issue determining the success or otherwise of supply chain collaboration
efforts.
However, trust is an ambiguous and complex phenomenon. Depending on their
discipline and the problems they have been studying, many researchers have
concentrated on the diverse aspects of trust and the process of trust development. In a
recent effort to bring together the elements most frequently cited in works from
various theoretical perspectives, Rousseau et al. (1998) formulated the following
definition, noting that the identification of common meaning does not imply that all
manifestations of trust reflect the same thing:
“Trust is a psychological state comprising the intention to accept vulnerability based
upon positive expectations of the intentions or behaviour of another”.
(Rousseau et al., 1998, pp. 393-405)
Therefore trust is a psychological state, not a behaviour. Economists have also
recognised the nebulous nature of trust:
“Trust and similar values, loyalty or truth telling are examples of what an economist
would call ‘externalities’. They are goods; they are commodities; they have real
practical value; they increase the efficiency of the system, enable you to produce more
goods or more of whatever values you hold in high esteem. But they are not
commodities for which trade on the open market is technically possible or even
meaningful”.
(Arrow 1974 cited in Smeltzer 1997, pp.41)
In recent years a number of authors have suggested various classifications of trust (see
Mollering, 1998 for an overview of currently available classifications), however,
Bachmann (2001) comments that it is doubtful whether these classification schemes
lead very far in coming to grips with the phenomenon. Sako (1992), for example,
distinguishes between arms-length contractual relations (dominant in the west) and
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obligational contractual relations (dominant in the east) and conceptualises three
forms of trust: contractual trust (the mutual expectation that promises of a written or
verbal nature will be kept), competence trust (the confidence that a trading partner is
competent to carry out a specific task) and goodwill trust (commitments from both
parties that they will do more than is formally required). Sako (1992) observes that
goodwill trust is far more prevalent in Japanese buyer-supplier relationships and that
it cannot be achieved without the presence of the other two types first. Simons et al
(2004) identify the absence of trust as a key inhibitor to supply chain collaboration
initiatives in the food industry. Stjernstrom & Bengtsson (2004) and Johnston et al
(2004), for example, suggest that relationships benefit from increasing trust. Hines
(1996) argues that trust is an outcome (rather than a cause) of successful supply chain
collaboration in Japan and that it is a set of other variables that lead to high-trust
supplier relations. Similarly, Rousseau et al. (1998) state that both risk and
interdependence are necessary conditions for trust.
Many authors have identified that the primary role of trust in inter-organisational
relationships is to mitigate risk. Das and Teng (2001) contend that trust and control
are two principal antecedents of risk. Ring and Van de Ven (1992) argue that varying
levels of risk and reliance on trust will explain the governance structures of
transactions. Zsidisin (2003) highlights the lack of grounded definitions of risk within
the context of supply. Kraljik (1983) discusses risk in terms of supply market
complexity and incorporates supply scarcity, the pace of technology and/or materials
substitution, entry barriers, logistics cost or complexity and monopoly or oligopoly
conditions. Harland et al. (2003) define supply risk as one of eleven risk types and
adopt Meulbrook’s (2000) definition of supply risk as being something that,
“adversely affects inward flow of any type of resource to enable operations to take
place” (pg 308).
Zsidisin (2003), in accordance with other studies investigating risk definitions (Pablo,
1999) find that supply risk is a multi-faceted concept that differs according to industry
(aerospace firms, for example, are more likely to understand risk in terms of threats to
customer life and safety) but that the most widely held definition of supply risk
focuses on understanding how risk affects a purchasing firm’s ability to meet its
customer requirements. Critical of previous efforts to address risk management in the
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absence of a grounded definition of risk (in particular Harland et al., 2003), Zsidisin
(2003) offers the following empirically grounded definition of supply risk.
“Supply risk is defined as the probability of an incident associated with inbound
supply from individual supplier failures of the supply market occurring, in which its
outcomes result in the inability of the purchasing firm to meet customer demand or
cause threats to customer life and safety”
(Zsidisin, 2003, pp. 222)
Other authors argue that trust within buyer-supplier relations can be explained via
another underlying factor, specifically, power. Ramsay (1996) identifies that
partnership formation involves a process of give and take. The supplier may expect to
get increased order security, improved forward order cover and reduced uncertainty
whilst the buyer hopes to achieve improved supply continuity, a better match between
the supplier’s sale specification and the his own specification as well as reduced long-
term costs.
“In a genuine partnership, each party makes a commitment to the other and modifies
its behaviour to more closely match the other’s requirements. Each also becomes
more dependent on the other – and thus both loses and gains power”.
(Ramsay, 1996, pp. 17)
Ramsay (1996) states that for the majority of smaller companies, that make up the
bulk of activity in any economy, the effort to form partnerships will frequently be met
by supplier indifference or resistance, and the strategy itself is high risk, high cost,
and necessarily involves purchasers in an undesirable net loss of power.
Cox (2001a) also argues that there will be only some power circumstances that will be
conducive to collaboration and that they will be in situations of buyer dominance or
where power was equally distributed between buyer and seller to create
interdependence.
(see figure 2)
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Cox (2001b; 2001c) suggests that practitioners map the dominant power regimes in
which they are located in order to formulate an understanding of which strategy,
either proactive supplier selection (or traditional arms-length approaches) or proactive
supplier development (more contemporary collaborative approaches) is most suitable.
However, any attempt to do so will reveal that power is itself a multi-faceted concept
and therefore subject to various interpretations. Further, if we view power in terms of
size and subsequent market leverage, others (Christiansen and Maltz, 2002) have
shown that even small purchasers, who have little size or power to force suppliers to
share leading edge technology, reserve production capacity or guarantee component
availability, can find ways to access supplier capabilities needed for the improvements
that customers demand. Power, most commonly viewed as market leverage, forms
another determinant factor to effective supply chain collaboration. However, it would
appear to be only one of a number of factors, rather than the ‘be all and end all’ as
argued by authors such as Cox.
3. Methodology
The choice of research methodology is dependent upon the set of research questions
under consideration and the state of knowledge development (Pettigrew, 1990).
Following Ahlstrom and Karlsson (2000) in deciding the most appropriate approach,
consideration was made of:
• The focus, which was the process of improving a given supply chain and the
relationships within in it, particularly between the focal firm (the food
processor) and the other seven single or group entities. The study of processes
is best served using longitudinal research (Kimberly, 1976).
• The fact that the study concerned change and adoption of new relationship
sets, it was best to study this as it happened in their natural field settings (Van
de Ven and Poole, 1995) as it is hard to establish cause and effect from
retrospective research (Leonard-Barton, 1990).
• The fact that longitudinal cases of change are rare and as such the research
was of an exploratory character.
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In order to gain a deep understanding of what was happening it was necessary to take
a significant amount of time in field research. This was necessary in order to provide
the depth of understanding necessary for subsequent theory building (Sofer, 1961). As
such it was only possible to study a single supply chain case where it was felt that the
change process would be likely to be transparently observable (Eisenhardt, 1989).
This choice, however, does limit the ability to generalise from this research. In order
to gain an appropriate level of research access, the choice was made of the Clinical
Methodology where researchers take an active role in and study the change (Stymne,
1970).
Following Ahlstrom and Karlsson (2000), the study began with the focal company’s
commitment to a lean supply chain initiative along the lines suggested by the current
authors. Under this approach the focal firm (and subsequently the other supply chain
actors) agreed to provide us as researchers with the opportunity to study the change
process as it unfolded in exchange for support with the implementation process. The
single deep pilot case study of a complete food industry supply chain was therefore
undertaken from August 2003 (before the start of the initiative) until May 2005 (when
the initiative developed past its original scope into a full Supplier Association (Hines,
1994)).
The role of one of the researchers included advising on the particular approach to
take, providing ‘expert’ input and background knowledge of other comparable food
industry cases, collating the results of the initiative and interviewing the participants
as to the effectiveness of the approach and their feelings about whether they or their
firms were gaining from the work. Data was gathered using: participant observation,
semi structured interviews (face-to-face with each firm with follow up telephone
conversations where further explanation was necessary) and documentation of the
various meetings that took place.
The other research played a more impartial role and did not provide advice, which,
inter alia, helped to gauge the role that the first researcher had in affecting the studied
organisations (Schon, 1983). This was also facilitated by the in-depth access and
familiarity with the firms involved together with the detailed documentation of the
process, which was subsequently used in the analysis.
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4. Instrumental Case: The Perfect Pineapple Supply Chain Programme 4.1 Background The Perfect Pineapple Supply Chain Programme was initiated in late 2003 and
involved an Australian canned pineapple supply chain stretching from a group of 171
growers, through transport links and a processing plant to a major retailer (Figure 3).
The supply chain also involved three key suppliers of cans, cartons and pallets.
(see figure 3)
The programme revolved around the central company that processes approximately
110,000 tonnes of fresh pineapple every year through a single facility. The majority of
processed fruit is canned either in slices (or rings), pieces, cut (small pieces), crush or
pulp for juice. The main processing period mirrors the two pineapple harvesting
seasons in Australia - a main harvest in the autumn (February-May) and a smaller
secondary harvest in spring (September-October).
The company was set up as a cooperative in 1946 when 900 local growers were
brought together to find a market for their surplus pineapple crop. The canning factory
was completed in 1947 and later became an unlisted public company in 1964. The
company is owned by about 700 fruit and vegetable growers. The majority of shares
are held by the 171 pineapple growing entities, who dominate the company’s board.
The company is Australia’s largest grower-owned fruit and vegetable processor,
handling about 15 varieties of fruit and 6 types of vegetables. Although pineapple
products once dominated production, today they represent approximately 20% of total
turnover.
The market for these products is largely domestic and is dominated by Australia’s two
major supermarket retailers who control about 80% of the total market. One of these
two retailers took part in this programme. The recent history of Australian
supermarkets has been one of consolidation and emulation of overseas best practice
particularly Wal-Mart of the United States and Tesco & Asda (now a Wal-Mart
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subsidiary) in the UK. In common with other markets, power in the Australian food
industry is seen to reside at the retailer with relationships in the supply chain generally
exhibiting low levels of trust (Sadler & Hines, 2002; Simons et al, 2004).
The retailer involved in the work was in the process of establishing a new Supply
Chain strategy involving inter alia:
• The development of a primary freight system which is an Australian
version of Factory Gate Pricing involving retailer-controlled collection,
cross docking and revised distribution centre configuration (for more
information on Factory Gate Pricing see Potter et al., 2003; IGD,
2003).
• Store friendly One Touch Replenishment involving a streamlined
material and information flow in the supply chain with the ideal of
touching product only once between point of manufacture and
checkout (for more information on One Touch Replenishment see &
Jones and Simons, 2000).
• Vendor to store shelf end-to-end process efficiency and integration.
• The development of supplier relationships.
• Delivery of cultural change and breakdown of functional silos.
At the start of the programme, there was only very limited evidence that the Retailer
had succeeded in actually implementing this new strategy, although its intent was
clear.
4.2 The Programme
In late 2002 the processor started a programme of manufacturing change under the
auspices of the newly appointed General Manager, Supply Chain and Operations,
Bernie Kelly. The first year (Step 1, of Figure 4) involved a series of improvement
initiatives at the main manufacturing site where pineapples are processed. This
improvement activity involved two outside consulting organisations and included the
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application of 5S housekeeping, Value Stream Mapping and a series of smaller
improvement programmes concerning the internal and external information flow.
During this period it became apparent to Bernie Kelly and his team that many of the
issues and problems faced by the company were the result either of actions taken by
other organisations, or were the result of a lack of complete supply chain
coordination. In addition, the company was suffering rapidly declining profits which
resulted in it reporting its first ever loss for the 2003 financial year. At the same time,
its major customers were increasing shelf space devoted to imported product
including canned pineapple from the Philippines. As a result it was decided to widen
the scope of the internal operations to encompass the wider supply chain. As
pineapple canning was still a mainstay of the firm and involved the company’s key
shareholders, the pineapple growers, it was decided to instigate a canned pineapple
supply chain project. The programme was later christened the Perfect Pineapple
Supply Chain Programme and involved the companies described above (Figure 3).
(see figure 4)
The next step (Step 2) was to bring together senior executives from the different firms
involved. This was done in November 2003 in a two-day meeting. The purpose of this
session was to establish what it was necessary to achieve, what the supply chain
looked like, what the programme could achieve and to gain a commitment from the
companies to take part in the programme. Each of the firms sent at least one senior
staff member and all expressed their willingness to take part.
During this workshop the major issues facing the supply chain became clear. The
Managing Director of the processor commented in his introduction to the event on the
high level of pressure exerted by retailers on the company, particularly in terms of
costs. This was particularly relevant as the company was losing market share in
canned pineapple to overseas competitors who had product retailing at 30% lower
prices. The MD also commented that it would be difficult for the company to absorb
these extra costs, causing concern among the three growers present, all of whom were
directors of the processor. The issue they faced was that they had not received an
increase in price for their pineapples for nearly 10 years. The MD’s introduction
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concluded with the view that the only way forward was to work together as a team for
everyones’ mutual benefit. This sentiment was mirrored by Bernie Kelly who
expressed the view that it was necessary to take a total supply chain perspective. This
view was generally accepted within the group. However, there was a concern
generally voiced that some, primarily the Retailer, would gain more than others or
even at the expense of the other participants.
The remainder of the two days was spent trying to build a coherent team through a
series of group exercises, brainstorming sessions of what was required as well as a
group exercise mapping the whole supply chain. This latter exercise was very
informative in that it showed that no one delegate had a good picture of the complete
supply chain and indeed very few could describe the operations within their own
business in great detail. A further workshop was employed to develop an ideal future
state, as well as the barriers to getting there. A wide range of barriers were discussed
and included: capital shortages; the problems in changing culture; issues surrounding
appropriate skilled resources to make the change; the generally older age of the
growers (average 58); the lack of integrated IT and the processor’s lack of an explicit
strategy.
The next step (Step 3) was to bring together the supply chain’s process owners, or
operational staff. This was done shortly after step 2 in a two day workshop which
followed a similar path to the executive group, except that less time was spent
discussing what was required and more on how it might be done. A group exercise
was carried out to map the supply chain. A far more detailed map was developed and
with it the real problems began to emerge. The general feeling of both meetings was
very positive and constructive with all supply chain members actively taking part.
Agreement was made to undertake a more detailed analysis of the supply chain in five
loops involving cross-company groups. The loops were a downstream loop (post
manufacture), a canning loop, an upstream fruit loop (up to delivery of pineapples)
and two loops for the cans and cartons respectively. This fourth step of further data
capture was undertaken during the summer of 2003-4 (November to February) by the
different process owner groups and was facilitated by an external consultant. The
result of this step was an agreed outline plan for each loop (Step 5).
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These plans were presented back by the process owners to the full executive group in
February 2004 in a meeting with 35 process-level and executive-level delegates. This
group was, however, without the Managing Director of the processor as he had
recently retired. An interim Chief Executive had been appointed and took part in the
workshop.
The event revolved around the feedback from the five loop groups on what they had
found and what projects they were recommending should take place, together with a
discussion of how this should be developed into a workable plan. The Retailer was
represented by three people at the workshop with one from the transport and logistics
area and two senior buying staff. The view from the retailer was that they were keen
to develop a new, closer relationship with suppliers but would do so only in a step-by-
step approach and only with like-minded firms. They saw the differentiator in whom
they would work closely with as being the people and resultant relationship, together
with the suppliers’ degree of enthusiasm and initiative. Bernie Kelly, on asking how
many other firms were undertaking such initiatives as the Perfect Pineapple Supply
Chain Programme, was told that they knew of none.
The discussions about the current position and what should be done were in general
very open and honest and short term gains of A$3-4m (£1.2-1.6m) were quickly
identified, although further financial analysis showed that the true financial benefits
could be in the order of A$20m (£8m). The different feedbacks were well received
and given in the spirit, either explicitly or implicitly, of a win-win result. However,
two areas of concern emerged at the end of the first of the two days. These concerns
were brought to the fore by the consultant who enquired how people were feeling at
this point. The first concern that emerged was that it was difficult to plan a supply
chain transition as a new strategic plan for the processor was being finalised. The
interim Chief Executive advised this would be completed before the next planned
meeting of the group in three months time. This largely reassured the group who felt
able to proceed with the existing outline direction set by the programme, as well as a
set of balanced measures that were developed for the work.
The second concern revolved around the fact that although all the firms were actively
taking part, not all seemed to be fully committed. In particular, concerns were raised
16
about the can and carton makers who were only able to identify savings of less than
A$100K (£40K) each. This appeared very small to the group. There was, however, an
interesting response when other members of the group asked the packaging suppliers
to rethink their stance before the following morning. The next day they advised that a
strategic review could be undertaken involving an analysis of the type of packaging
used and how this might be changed, for example, from cardboard boxes to plastic
bins. The benefits from this could be considerable.
As a result of these discussions, various uncomfortable issues were brought to the
surface, and hidden and unspoken concerns were shared. The result was that the
atmosphere changed from being unsure to very positive. This positive feeling was
reinforced by what was believed to be a strong plan involving all the respective firms
in its delivery. The top level of the plan is shown in Figure 5. The implementation of
the plan (Step 5) started in late February 2004.
(see figure 5)
Since this point the group has continued along the implementation plan and has
started to gain significant benefit which according to Bernie Kellie, already run into
several A$m. As a result of this, the food processor has decided to extend the scope of
the work to include a further loop, namely a beetroot loop involving four of their eight
beetroot farmers. This category represents a further 15% of the processors turnover.
This step is a prelude to the development of further loops (for example for baby food
raw material ingredients and fruit or fruit concentrate for fruit juice). It has also been
decided that once these further loops are in place (probably in late 2005) then the
complete extended group of companies (i.e. members of the Perfect Pineapple group
and members of the new loops) would come together periodically and hence take on
the shape and dynamics of a true Supplier Association (Hines, 1994).
5. Explanation and Discussion
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5.1 Explanation
In order to explain what was happening within this case a simple two phase
development model will be presented, primarily in terms of changes at a macro level
to the risk and trust that the food processor had developed both with (but also to some
degree, between) members of the Perfect Pineapple Supply Chain Programme.
5.1.1 Phase 1 Explanation
During the early stages of the work the processor was attempting to gain commitment
by increase knowledge transparency, starting to increase competence levels and
attempting to set up a common destiny relationship set. In the process they were
seeking to move away from historical contractual relationships (or what Sako (1992)
terms a Contractual Trust relationship) that carried a varied but generally low level of
trust and resulted in a high level of risk for all involved (see phase 1 in Figure 6).
(see figure 6)
Specifically, they were attempting to reduce bounded rationality by creating an open
forum for exchange of views and information. The initial two 2-day workshops
attempted to do this at both strategic and operational levels. This process involved
identifying common (or not common) issues, concerns and visions for the supply
chain as well as the mapping of the complete chain by the cross-company group in
both meetings. Thus, bounded rationality was further reduced in the detailed mapping
of the chain in Step 4 (see Figure 4).
This mapping activity not only sought to reduce bounded rationality but also to
increase the individual and collective competence of the group both in their own, and
the remainder of the supply chain. As a result, the various individuals could see the
bigger picture and gain commitment themselves by seeing that others were likely to
be involved in the many suggested improvement projects. In addition, this increase in
individual and collective competence was likely to increase switching costs for new
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supply chain entrants, increasing barriers to entry and reducing risk for the present
incumbent firms.
In this phase, as we have observed above, senior staff from the processor went out of
their way to try to develop a sense of common destiny both in their introductory
addresses, by working to develop common measures across the supply chain, and by
creating an environment where mutually beneficial bottom-up plans could be
developed by teams from across the supply chain. All this helped to reduce risk and
create a common theme of “us” in the supply chain. In addition, further commitment
was sought through being involved in an innovative initiative, with the full
involvement of the retailer. However, at this point it was not yet possible to achieve
the full commitment of all, in particular the packaging firms, as trust had not yet been
developed.
5.1.2 Phase 2 Explanation
During the second phase of activity (steps 6 and 7: see Figure 4) the processor was
attempting to increase trust, having gone a significant way to reducing risk for all
those involved. This second phase involved the development of learning curve effects,
the withholding of power, the removal of opportunistic behaviour and ultimately was
leading to at least the promise of increased asset specificity. In terms of the
explanatory model, the processor was seeking to move beyond competence trust to
achieve goodwill trust, or any and all firms doing more than their explicitly stated
commitments (see phase 2 in Figure 6).
As can be seen in Figure 5, staff at the processor worked hard to ensure that a place in
the improvement work could be found for all of the firms. In addition, they developed
an approach that was sustainable, as it was not just focused on some illusory quick
wins but rather a longer term approach of at least three years duration. Indeed, even at
the early stages of the work they held informal discussions about developing the
programme into a type of ongoing Supplier Association programme, rather than a
one-year duration project (Hines, 1994). This stage was being developed at the time
of writing in the middle of 2005. This longer term approach is designed to ensure that
19
the benefits of learning curve effects are locked in for the benefit of the total group of
firms and to lock in continued and repeated Hawthorne effects (Hines et al., 1998).
The second phase also involves the development of withheld power with a common
set of metrics and attention played to the fact that all the firms involved need to see
some benefit from the work. An example of the withheld power was the ‘quiet word’
from Bernie Kelly to the packaging firms when they appeared not to be giving their
full commitment. This discussion reassured them that their involvement would only
benefit their firms and lead to a longer term relationship with greater profit potential
to all involved. Thus Bernie was seeking and getting a higher level of commitment
not through threats and power games, but through encouragement. Such an approach
also reinforces the common destiny of the group and should further reduce
opportunistic switching behaviour. Such behaviour is also less likely due to the high
profile of the work and the very public sponsorship by the National Food Industry
Strategy.
Proof that the relationship and trust was starting to develop was the change in attitude
of the packaging firm in both committing dedicated resources to a strategic rethink of
their customer’s packaging needs, as well as a promise to move with them (i.e.
increase asset specificity) if it became necessary for the processor to relocate as a
result of the improvement activities.
Thus as can be seen in Figure 6, this second phase of activity has moved the
relationship set on from a competence based trust to the start of a goodwill trust where
individual actors are starting to do things for the common good of the group rather
than their individual benefit. The development of the full Supplier Association, that is
at the time of writing underway, will further cement this development. This type of
two phase development has proved to be highly beneficial to the firms involved.
However, as discussed above, arguably this approach may not be suitable in all other
environments. The reasons why it was appropriate here is that this environment
involved:
• regular repeated transactions (with daily or weekly orders)
20
• the willingness to hold back from explicit power relationships and the
use of ‘withheld power’
• an agreed common benefit in working together
• a specific non-commodity product
• appropriate outside facilitation to make concerns explicit.
5.2.1 Discussion: Adding Two More Variables
One observation about this case is that all the firms to a greater or lesser degree took
an active and positive role in the improvement activity. In addition, the relationship
between the focal food processor and all the other firms improved, as did many of the
relationships between the firms involved. Coupled to this there are clear explanations
for some of the activities and relationships if we view the case through the three
different lenses of trust, risk and power.
However, we also concluded that although each of these lenses is important, even
together they are insufficient to explain the behaviour set. As a result of our
observations within this case, we would tentatively like to suggest two further inter-
linked factors that determined the success of collaboration effort in this case and may
well have an importance in other instances. These are: the type of ownership and
corporate governance (and resultant governance structure); as well as the individual
employee commitment or engagement.
Corporate governance is concerned with the decision made by senior executives of a
firm and the impact of their decision on various stakeholder groups and therefore
refers to the relationship between the board and the firm. Bradley (2004) comments
that the search for the link between returns and governance is the Holy Grail for many
practitioners and academics in the field of corporate governance and that an ever-
growing amount of evidence now exists to suggest that these links do not exist.
Nonetheless we would argue that the corporate governance does influence
management’s approach to control versus commitment in the workplace.
21
Walton (1985) identifies these two opposing approaches to a company’s human
capital and points out the key challenges in moving from one to another. We would
suggest that the firm’s progress in this regard is likely to impact the individual’s
predisposition to supply chain collaboration’s success or otherwise. Lucy et al. (2004)
coin the term ‘employee engagement’, highlighting its importance to the success of
any change initiative. Indeed, their research suggests that people’s degree of
engagement is likely to be influenced by a range of personal and corporate objectives
that may not be at all obvious at first sight to the casual observer. As such these are
often missed within supply chain research. Supply collaboration invariably involves
the reshaping of supply chain partner’s patterns of behaviour and therefore demands a
high commitment, a function of corporate governance, initially from the leading
partner and subsequently from all parties involved.
5.2.2 Applying Five Lenses to the Case
In order to understand the dynamics and relationships within the case study, it will be
useful to review the five determinant factors discussed in Section 2 (power, risk and
trust) and above (ownership and governance structures, and commitment) and see
how these have impacted on each of the participating firms. Before doing this, it will
be useful to explore how a single lens perspective may give a misleading or
incomplete impression of reality. In order to illustrate the point, we will take the
example of a single power lens as advocated by Cox (see Cox, 2001a, 2001b, 2001c).
Using a development of Cox’s power regime approach we can develop a Power Map
(Figure 7). In this figure the physical movement of product has been mapped with the
width of the arrows proportional to the transactional cash value flows and the figures
in circles representing the total business turnover of each firm. Following Cox
(2001b), the symbols used represent:
< buyer having power over supplier
> supplier power over buyer
= interdependence
0 independence
22
(see figure 7)
The resulting set of relationships are shown in Figure 7, with the retailer holding
power over the processor, primarily due to their size and ability to switch to cheaper
imported product. The processor can be seen to hold power over the can and carton
maker as well as their inbound transporter. A relatively interdependent relationship
exists between the processor and the outbound transporter and due to their low
reliance on each other, a relatively independent relationship with the pallet supplier.
An interesting case in point is that at the operational level, the processor holds power
over the growers. However, at a less superficial level, the governance structures
between the two mean that the processor is owned largely (97%) by the pineapple
growers. Indeed, the board of the processor is dominated by pineapple grower
directors
Following the Cox power regime analysis approach (Cox, 2001b) it should then be
possible to interpret where successful supply chain relationships and development are
possible and where existing power regimes would preclude their effectiveness.
According to Cox such a supply chain approach will only work where there is buyer
dominance or buyer-supplier interdependence.
(see figure 8)
Bearing in mind the supply chain is centred on the processor, it can be predicted that
the processor will be able to encourage the two transport firms and two packaging
suppliers actively to take part, but find it very hard to engage the other firms.
However, careful observation of our case, in particular during the first part of Step 6
(see Figure 4), showed a different picture. In gaining agreement to the programme of
change and commitment to these improvement activities and tangible benefits,
various difficulties emerged, which it would appear, could not completely or even
largely, be explained by existing power regimes. Indeed, careful observation of the
participants, prompted by the consultant, showed that the following picture was
emerging (Figure 9).
(see figure 9)
23
As the programme of activities aligned closely with the retailer’s strategic objective,
the retailer was enthusiastic about the programme. In addition, the growers were
enthusiastic because it was ultimately to their benefit for the processor to produce a
better financial result. The other company that showed the greatest enthusiasm for the
work was the outbound transporter. However, this owed little to the interdependence
it enjoyed with its customer, the processor, and more to the perceived threat and risk
that it felt in potentially losing business once the retailer implemented its Primary
Freight initiative.
In addition, the inbound freight firm was not brought fully into the initiative in the
early stages, but this appeared to be more to do with commitment levels of the
individuals involved. This was more however to do with the fact that the early
discussions were at too high a level for the individuals involved to be able to easily
grasp, than their willingness to get involved per se. Indeed, once the discussions
started to become more operational (Step 4 in Figure 4) there was a much higher level
of personal engagement. The pallet firm similarly appeared not to be taking a very
active part. Here, the reason appeared to be more around the fact that with
improvements to the supply chain, they were likely to lose business as the number of
pallets required would be reduced.
The last case involved the two packaging suppliers who were only appearing to pay
lip service to the work and were offering only marginal benefits. Their lack of
involvement can be best explained in two ways: first, that the individuals involved
saw little in the work in terms of career development; second, and more importantly,
they were not trusting of the processor due to a history of adversarial price reduction
demands.
In each of these examples the reactions and involvement of the different companies
was sensible and indeed logical from their perspective. However, their responses
cannot adequately be explained simply through a power lens as we saw above.
However, by viewing each company through each of the five lenses discussed above
(power and dependency; risk; trust; ownership and governance structures;
commitment) their behaviour can be both understood and explained (Table 1).
24
(see table 1)
In reality, each of the five variables had some influence on individual firms’
behaviours and how engaged they were (highly engaged firms are shown with a ü)
but in each case one variable was pre-eminent in shaping the behaviour. The pre-
eminent variable for each firm is shown by a black box against the relevant variable in
Table 1. In this particular case study, as this data capture was carried on in a real time
manner using a Clinical approach, it was possible to:
• Seek to address how each less engaged firm could be brought on side
more readily and quickly
• Understand what was motivating the highly engaged firms and to try to
ensure that this factor was built upon in order to sustain the firm’s
positive role
In addition to this it should be possible to repeat the multi-lens assessment
periodically with the firms involved as inevitably some of the variables will change in
importance and weighting. This might be achieved in the forthcoming period perhaps
on a six-monthly basis at future full-group Supplier Association meeting.
6. Conclusion
6.1 Returning to the Research Questions
In this paper the authors have attempted to address four research questions. The first
research question sought to understand how three well-established variables (power
and dependency, trust and risk) impinge and explain the actions of actors within a
supply chain. The Clinical Methodology adopted in this research has helped the
researchers to develop a deep understanding of how each of these variables has
affected the different actors within the case. It has been shown that in every case each
of these lenses has proved helpful in understanding the motivation of behaviour.
25
However, we have demonstrated that none of these three factors on their own can be
used adequately to explain the behaviour of any one of the actors.
Linked to this first research question, the second question set was to explore which of
above three variables might be more important in shaping the actions of each actor.
The analysis presented in Table 1 showed that with at least one case each, each of
these variables was the single most important factor in explaining behaviour (or lack
of behaviour). Power and dependency was most important for the pallet supplier, risk
was most important for the outbound transporter and the canner and trust (or lack of
it) was most important for both can and carton suppliers.
Our third question sought to understand whether there are any other important
variables in addition to power, trust and risk. It was clearly established in the research
that even considering each of the three variables above, it was still not possible, in this
particular case, to explain the behaviour of the firms involved. Indeed, here we found
two additional factors which were pre-eminent in their explanatory nature for at least
one of the firms involved. These were the ownership and governance structures (most
important for the growers) and personal commitment (most important for the retailer).
The last research question was contingent on their being a complex set of explanatory
variables at play, which there did indeed prove to be. Should this be the case we had
decided to show how gaining a more detailed understanding of the different variables
at play might be used to help improve the supply chain through better relationships
and more effective improvement activities. This was achieved in two ways. First, an
explanatory model was developed (Figure 6) to supplement our description of what
was happening within the case and second a table (Table 1) was constructed that
summarises the impact of the different variables on each of the actors together with
which was most important in influencing positive or more neutral behaviour. What
was found was that only a deep understanding of the actors would yield a full picture
of all the different causes and effects.
6.2 Managerial Aspects and Learnings
26
The research presented here has perhaps three important managerial aspects and
learnings. The first is that taking a simple ‘everything can be explained by one
variable’ approach was not appropriate in this study. This was highlighted by showing
how using a single lens (here that of power) led to a poor understanding of what might
be occurring. Indeed, although this may be appropriate in very rare examples, we
believe that such a single-lens approach is very limited, if not indeed quite dangerous
as inappropriate solutions may be generated.
The second managerial learning is that we have shown that a multi-lens approach
helps ensure that a better understanding is developed, which can lead to further stages
of analysis and solution development. In this case the most appropriate five lenses
were power and dependency; risk; trust; ownership and governance structures; and
commitment. As a result an explanatory model could be presented, which may proved
a useful framework for establishing closer long term relations within a supply chain
setting, particularly where:
• there are regularly repeated transactions
• there are (or could be) common goals
• the stronger actors are willing to withhold power for the good of the
whole supply chain
• the products or services provided are in some way bespoke or unique
(unlike for instance pure commodity products)
• there is appropriate outside facilitation to make concerns explicit.
However, a caveat to this is that the five variables used here may not be the most
important variables in all other cases, although they may provide a useful starting
place for a discussion of the most helpful lenses to apply.
The final managerial learning of note is that, either on a one-off occasion, or better
still on a periodic basis, using a framework such as Table 1 to help understand and
explain the behaviour of actors is likely to the first step in develop a better and more
sustainable set of relationships which will result in a more effective supply chain.
27
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Figure 1: The Key Transition from Open-Market Negotiations to Collaboration
(Source, Speckman, Kamauff and Myhr, 1998, pp.57 )
CollaborationCoordinationCooperationOpen marketnegotiations
•Price-based discussions•Adversarial relationships
•Fewer suppliers•Longer termcontracts
•Information linkages•WIP linkages•EDI exchange
•Supply chain integration•Joint planning•Technologysharing
CollaborationCoordinationCooperationOpen marketnegotiations CollaborationCoordinationCooperationOpen marketnegotiations
•Price-based discussions•Adversarial relationships
•Fewer suppliers•Longer termcontracts
•Information linkages•WIP linkages•EDI exchange
•Supply chain integration•Joint planning•Technologysharing
36
Figure 2: The Power Matrix
(Source Cox, 2001a, pp. 13)
Buyer Dominance • Buyer in a position of power • Use power as leverage to obtain quality, cost and supply improvements • Ensures supplier returns are normal
Interdependence • Both buyer and seller have resources that ensure both work closely together • Neither party in a position to force the other to take actions they do not want to take • Supplier may make higher than normal returns, but delivers innovation and some degree of value to buyer
Independence • Neither party has a position of dominance over the other • Usually supplier makes normal returns due to lack of opportunities
• Supplier has opportunity to make higher returns when faced with buyer ignorance or incompetence
Supplier Dominance • Supplier in a position of power • Supplier has opportunity to close market to competitors
• Many barriers to entry allow above normal returns
• Buyer would be both price and quality receiver
High
High
Low
Low
Power buyer attributes relative to supplier
Supplier power attributes relative to buyer
Buyer Dominance • Buyer in a position of power • Use power as leverage to obtain quality, cost and supply improvements • Ensures supplier returns are normal
Interdependence • Both buyer and seller have resources that ensure both work closely together • Neither party in a position to force the other to take actions they do not want to take • Supplier may make higher than normal returns, but delivers innovation and some degree of value to buyer
Independence • Neither party has a position of dominance over the other • Usually supplier makes normal returns due to lack of opportunities
• Supplier has opportunity to make higher returns when faced with buyer ignorance or incompetence
Supplier Dominance • Supplier in a position of power • Supplier has opportunity to close market to competitors
• normal returns • Buyer would be both price and quality receiver
Buyer Dominance
Interdependence
Independence
Supplier Dominance
High
High
Low
Low
attributes relative to supplier
Supplier power attributes relative to buyer
37
Figure 3: The Perfect Pineapple Supply Chain Membership
CartonSupplier
RetailerCanner StoreGrowers
Can Supplier
Inbound
Transporter
Pallet Supplier
OutboundTransporter
CartonSupplier
RetailerCanner StoreGrowers
Can Supplier
Inbound
Transporter
Pallet Supplier
OutboundTransporter
38
Figure 4: The Seven Step Perfection Pineapple Supply Chain Programme
Internal Improvement Activity at Canner
Supply Chain Workshop for Executive Staff
Supply Chain Workshop for Process Owners
Value Stream Mapping in Supply Chain Loops
Supply Chain Process Owner Improvement Plan
Agreed Supply Chain Improvement Plan
Improvement Programme & Ongoing Reviews
PLAN
PLAN
DO
DO
CHECK
ACT
ACTSTEP 1
STEP 7
STEP 6
STEP 5
STEP 4
STEP 3
STEP 2
Internal Improvement Activity at Canner
Supply Chain Workshop for Executive Staff
Supply Chain Workshop for Process Owners
Value Stream Mapping in Supply Chain Loops
Supply Chain Process Owner Improvement Plan
Agreed Supply Chain Improvement Plan
Improvement Programme & Ongoing Reviews
PLAN
PLAN
DO
DO
CHECK
ACT
ACTSTEP 1
STEP 7
STEP 6
STEP 5
STEP 4
STEP 3
STEP 2
39
Figure 5: The Perfect Pineapple Supply Chain Plan
E ase T im in g
R eta ile rT ransp O u t C anner
T ransp In G rowers
P a lle t S upp ly
C arton S upp ly
C an S upp ly
Custom er In tegration S T/LT ü ü ü üA lign consum er dem and p ro ject 10 to 8 days S O H @ Re ta ile rs D C s 2 S T ü ü üS m oothing m a te ria l flow (a ll p roduct) transpo rt / p rim ary fre ight / packag ing 5 LT ü ü üC onsum er trends (a lignm ent C anner/re ta ile r) 2 S T ü ü üIn ternal In tegration JD I/LT ü ü üA vo id shift wo rk w ith supp ly m od ifica tion / ana lys is 3 JD I üC ost bene fit o f unswee tened from concentra te 2 JD I üNitra te m anagem ent 2 JD I üS K U ra tiona lisa tion 4 JD I/S T ü ü üA lign fruit intake to sa les dem and 4 LT ü üRem ove nightshift requirem ent / asse t uti lisa tion 3 LT üRationa lise o f p rocess lines 5 LT üReduction o f on-the -job tra ining o f seasona l s ta ff 3 LT üReducing p rem ium pa id fo r casua l labour 3 LT üRem ove ine ffic iency in low vo lum e pe riod 3 M T üG rower In tegration JD I/LT ü ü üIncrease suga r leve ls through qua lity based paym ent system (Q B P S ) 4 JD I/LT ü üReview g rower ra tiona lisa tion 5 LT ü ü üF easib ili ty s tudy o f sourc ing supp ly op tions a ligned to custom er requirem ents 4 LT ü ü üPackaging In tegration JD I/LT ü ü ü üF ive day ca rton invento ry p ro ject 2 JD I/S T ü üE lectronic Rece ip ting 3 JD I/S T ü üP LI (P roduct, leade rship & Innova tion) G eneric ca rton cost feas ib ili ty p ro ject: reduce S K Us 3 M T/LT ü ü üC an guage p ro ject (a ll p roducts) 2 S T ü üTin C oa ting 2 M T ü üP LI - P roduct, Leadership & Innova tion 3 M T/LT ü ü üE D I - Rece ip ting 3 JD I/S T ü üF orecast A ccuracy 4 LT ü üEnablers JD I/S T üD eve lop & C om m unica te S hort - Long Te rm S tra tegy fo r P ineapp les 3 JD I/S T üC ontinued costing and p ro fit po tentia l 3 S T üC onfirm ta rge ts & current s ta te 2 JD I/S T ü
T eam
JDI = Up to 3 monthsST = Up to 6 monthsMT = Up to 18 monthsLT = Up to 5 years
E ase T im in g
R eta ile rT ransp O u t C anner
T ransp In G rowers
P a lle t S upp ly
C arton S upp ly
C an S upp ly
Custom er In tegration S T/LT ü ü ü üA lign consum er dem and p ro ject 10 to 8 days S O H @ Re ta ile rs D C s 2 S T ü ü üS m oothing m a te ria l flow (a ll p roduct) transpo rt / p rim ary fre ight / packag ing 5 LT ü ü üC onsum er trends (a lignm ent C anner/re ta ile r) 2 S T ü ü üIn ternal In tegration JD I/LT ü ü üA vo id shift wo rk w ith supp ly m od ifica tion / ana lys is 3 JD I üC ost bene fit o f unswee tened from concentra te 2 JD I üNitra te m anagem ent 2 JD I üS K U ra tiona lisa tion 4 JD I/S T ü ü üA lign fruit intake to sa les dem and 4 LT ü üRem ove nightshift requirem ent / asse t uti lisa tion 3 LT üRationa lise o f p rocess lines 5 LT üReduction o f on-the -job tra ining o f seasona l s ta ff 3 LT üReducing p rem ium pa id fo r casua l labour 3 LT üRem ove ine ffic iency in low vo lum e pe riod 3 M T üG rower In tegration JD I/LT ü ü üIncrease suga r leve ls through qua lity based paym ent system (Q B P S ) 4 JD I/LT ü üReview g rower ra tiona lisa tion 5 LT ü ü üF easib ili ty s tudy o f sourc ing supp ly op tions a ligned to custom er requirem ents 4 LT ü ü üPackaging In tegration JD I/LT ü ü ü üF ive day ca rton invento ry p ro ject 2 JD I/S T ü üE lectronic Rece ip ting 3 JD I/S T ü üP LI (P roduct, leade rship & Innova tion) G eneric ca rton cost feas ib ili ty p ro ject: reduce S K Us 3 M T/LT ü ü üC an guage p ro ject (a ll p roducts) 2 S T ü üTin C oa ting 2 M T ü üP LI - P roduct, Leadership & Innova tion 3 M T/LT ü ü üE D I - Rece ip ting 3 JD I/S T ü üF orecast A ccuracy 4 LT ü üEnablers JD I/S T üD eve lop & C om m unica te S hort - Long Te rm S tra tegy fo r P ineapp les 3 JD I/S T üC ontinued costing and p ro fit po tentia l 3 S T üC onfirm ta rge ts & current s ta te 2 JD I/S T ü
T eam
JDI = Up to 3 monthsST = Up to 6 monthsMT = Up to 18 monthsLT = Up to 5 years
40
Figure 6: An Explanatory Model of the Perfect Pineapple Supply Chain
Programme
Trust
Risk
Low
Low
High
High
Contractual Trust
Competence Trust
Goodwill Trust
Reduce Bounded Rationality,
Increase Competence & Develop Common Destiny 1
Develop Learning Curve Effect, W
ith-hold Power, Remove Opportunism &
Develop A
sset Specificity
2
Trust
Risk
Low
Low
High
High
Contractual Trust
Competence Trust
Goodwill Trust
Reduce Bounded Rationality,
Increase Competence & Develop Common Destiny 1
Develop Learning Curve Effect, W
ith-hold Power, Remove Opportunism &
Develop A
sset Specificity
2
Low
Low
High
High
Contractual Trust
Competence Trust
Goodwill Trust
Reduce Bounded Rationality,
Increase Competence & Develop Common Destiny 1
Develop Learning Curve Effect, W
ith-hold Power, Remove Opportunism &
Develop A
sset Specificity
2
41
Figure 7: Power Regimes within the Perfect Pineapple Supply Chain
$7.2bn
$20.7bn
$2.5bn
$10.7bn
<
<
< 0
==/>
Retailer
Outbound TransporterInbound Transporter<$5m
PineappleGrowers
$20m(171 farms)
Can/CartonSupplier
Pallet Supplier
Canner$400m
All figures in Australian Dollars
A$1 = approx UK£0.4
$7.2bn
$20.7bn
$2.5bn
$10.7bn
<
<
< 0
==/>
Retailer
Outbound TransporterInbound Transporter<$5m
PineappleGrowers
$20m(171 farms)
Can/CartonSupplier
Pallet Supplier
Canner$400m
All figures in Australian Dollars
A$1 = approx UK£0.4
42
Figure 8: Predicted Effectiveness of Integrated Supply Chain Management
Figure 9: Actual Effectiveness of Integrated Supply Chain Management
<
<
< 0
==/>
Retailer
Outbound TransporterInbound Transporter
PineappleGrowers
(171 farms)
Can/CartonSupplier
PalletSupplier
Canner
ü ü
ü
<
<
< 0
==/>
Retailer
Outbound TransporterInbound Transporter
PineappleGrowers
(171 farms)
Can/CartonSupplier
PalletSupplier
Canner
ü ü
ü
<
<
< 0
==/>
Retailer
Outbound TransporterInbound Transporter
PineappleGrowers
(171 farms)
Can/CartonSupplier
PalletSupplier
Cannerü ü ü<
<
< 0
==/>
Retailer
Outbound TransporterInbound Transporter
PineappleGrowers
(171 farms)
Can/CartonSupplier
PalletSupplier
Cannerü ü ü
43
Table 1: Involvement & Influences in the Perfect Pineapple Supply Chain
Programme
Initially lowPublicly quotedPlaying the negotiating game
Risk of losing businessDependent on CannerCarton Supplier
Initially lowPublicly quotedPlaying the negotiating game
Risk of losing businessDependent on CannerCan Supplier
MediumPublicly quotedGood relationshipsRisk of new technology in One Touch Replenishment
Independence from CannerPallet Supplier
High at both levelsOwn / Direct Canner but historically kept in the dark operationally
Love hate relationship with Canner
Risk of Canner losing market share
Strategically over CannerGrowers
Low at first as strategic discussion at too high a level to engage
Family ownedClose relationship to Canner
Risk of reduced pineapple business
Dependent on CannerInbound Transporter
High at each level, skills gaps at process level
Historically keeps Grower d irectors in the dark
Good relationship with all players, sometimes arms length with Growers
Losing market share to imported product
Power over packaging suppliers& Inbound Transport
Canner
High at each levelPublicly quotedGood relationship with Retailer & Canner
Risk of losing distribution contract in Retailer’s Primary Freight initiat ive
Interdependence with CannerOutbound
Transporter
High at senior levels, medium at process owner level
Publicly quotedTraditional arms length, starting to use new close relationship language
Little riskPower over Canner & Outbound TransporterRetailer
CommitmentOwnership & Governance Structures
TrustRiskPower & Dependency
üüü
ü
Initially lowPublicly quotedPlaying the negotiating game
Risk of losing businessDependent on CannerCarton Supplier
Initially lowPublicly quotedPlaying the negotiating game
Risk of losing businessDependent on CannerCan Supplier
MediumPublicly quotedGood relationshipsRisk of new technology in One Touch Replenishment
Independence from CannerPallet Supplier
High at both levelsOwn / Direct Canner but historically kept in the dark operationally
Love hate relationship with Canner
Risk of Canner losing market share
Strategically over CannerGrowers
Low at first as strategic discussion at too high a level to engage
Family ownedClose relationship to Canner
Risk of reduced pineapple business
Dependent on CannerInbound Transporter
High at each level, skills gaps at process level
Historically keeps Grower d irectors in the dark
Good relationship with all players, sometimes arms length with Growers
Losing market share to imported product
Power over packaging suppliers& Inbound Transport
Canner
High at each levelPublicly quotedGood relationship with Retailer & Canner
Risk of losing distribution contract in Retailer’s Primary Freight initiat ive
Interdependence with CannerOutbound
Transporter
High at senior levels, medium at process owner level
Publicly quotedTraditional arms length, starting to use new close relationship language
Little riskPower over Canner & Outbound TransporterRetailer
CommitmentOwnership & Governance Structures
TrustRiskPower & Dependency
üüü
ü
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